Regulation and compliance rarely dominate payments headlines outside of major legal battles. Yet for heads of payments and payments product owners, the gap between regulatory intent and transaction-level reality can have material implications for strategy decisions and acceptance costs.

Payments is an increasingly complex ecosystem, and merchants are forced to make assumptions every day around issuer behavior, tokenization, wallets, and routing capabilities. When the Federal Reserve issued its PINless debit routing clarification in 2022, many expected it would resolve a major challenge facing merchants: ensuring that debit routing optionality would be preserved as payments increasingly evolve towards tokenized credentials and digital channels.

In reality, debit routing outcomes remain far more complex. While the Fed’s clarification reinforced the principle of routing choice, execution varies significantly across the payments ecosystem. These gaps are not simply operational quirks; they represent potential value leakage from routing strategies that merchants have negotiated and optimized around.

PINless Routing: Preserved in Principle, Fragmented in Practice

The Durbin Amendment requires debit cards to have at least two unaffiliated network routing options and the Fed’s clarification states this should be for “all debit card transactions.”¹ Therefore, the merchant assumption would be that whether a consumer taps a physical card, uses a stored credential, or pays through a digital wallet, they should retain the ability to exercise routing choice. The reality has proven to be much more nuanced.

As PINless enablement varies significantly by network, channel, processor, BIN, and merchant configuration, transaction-level visibility is required to understand how routing behaves in practice. Through its Merchant Payments Intelligence (MPI) platform, CMSPI is uniquely positioned to observe these dynamics across a broad population of merchants.

Despite the updated regulatory framework, MPI data shows that regulated debit transactions are not PINless-enabled 100% of the time. The difference across channels is striking, with card-not-present (CNP) regulated debit transactions at just about 90% PINless-enabled while card-present (CP) regulated debit transactions are closer to 50%. This gap highlights that the existence of the Durbin Amendment has not guaranteed consistent routing outcomes.

While CNP regulated debit transactions exhibit considerably higher PINless enablement rates, the remaining gap can still have a significant impact on routing strategies. Routing performance and network commitments are often measured at the issuer BIN level, meaning that all it takes is one issuer portfolio with limited enablement for transaction flows to deviate from expectations. As a result, merchants may believe they are capturing the benefits of their routing arrangements while transactions are instead bypassing preferred networks and eroding value.

Fees and Regulation: Rising Costs Without Guaranteed Outcomes

Merchants are facing increasing cost pressure from higher network and interchange fees, with CMSPI estimating fee changes from April 2026 may cost merchants up to $3 billion annually.² Many of these fees are designed to improve transaction data, authorization performance, and security, but in practice translate to rising acceptance costs for merchants operating in digital channels.

While merchants have limited control over fee structures, routing optimization remains one of the main levers available to offset rising costs. However, this depends on whether transactions are truly PINless-routable, amplifying the importance of understanding routing behavior rather than assuming availability.

Moving Beyond Assumptions

The Federal Reserve’s clarification did not create a world where every wallet transaction is automatically PINless-routable. Rather, it clarified that routing choice should be preserved despite tokenization or transaction channel. There remains a meaningful difference between regulatory intent and operational reality.

Merchants should avoid making assumptions based solely on wallet adoption, tokenization rates, or debit volume. Instead, validating routing availability at the issuer and network level, understanding how their processors handle and report tokenized transactions, and quantifying where routing opportunities exist today are imperative.

The merchants that move beyond assumptions and focus on actual routing behavior will be best positioned to maximize competition, reduce costs, and ensure they are capturing the benefits that Durbin was intended to provide.